The U.S. Chooses Favorites: North Korea over South Korea

I’m not sure how crossed your wires have to be to side with North Korea over South Korea, but that’s exactly what Trump did over the weekend. So, what will this mean for the future of U.S. and South Korean relations?

South Korea is much more than a security ally; they are a global leader in shipbuilding and DRAM production…and guess what two things the U.S. will need in the coming years? If the U.S. continues to pull back from South Korea, expect it to restructure its military and pursue nuclear armament.

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Transcript

Hey, everybody. Peter Zeihan here  coming to you from Colorado. I was just listening to the radio, and I had to pull over because I couldn’t believe it. I thought I was listening to some sort of satire radio, but no. Donald Trump is in the process of functionally ending the alliance with South Korea, specifically, the South Koreans and the United States have annual exercises to basically prepare for North Korean invasion. And, Trump has largely ended U.S. participation of it, which is a long standing North Korean propaganda demand. In his Truth Social post, Trump said a lot of bad things about South Korea, specifically called out Chairman Kim of North Korea, the despot, as one of his good friends and as a respectful leader and whew… 

Three big things here. Number one. Bothers me that I have to say this out loud, but North Korea is not a friend. North Korea is literally pointing to their nuclear tipped, nuclear weapons at us, and is one of the world’s greatest concentrations of cyber crime, specifically crypto crime that disproportionately attacks Americans. So the idea that Trump has a personal relationship with the dictator Kim, and that is somehow benefiting the United States, is delusional at best. 

Number two, yes, South Korea is a beneficiary of the United States. But I would argue in a post globalized world, South Korea is one of the top five countries that we really, really want to have a strong relationship with. Once you get past the trade disputes that the Koreans and the Americans have, which I might add were largely addressed by a free trade agreement negotiated by Trump One. There are two really big things that we need them for. Number one, South Korea is one of the world’s best shipbuilders, and the US Navy was relying upon Korean tech, Korean technicians and Korean modules in order to jumpstart U.S. naval ship building. We can probably now kiss that goodbye, which means that the rate of building new ships is going to continue to be very slow. 

The second piece is in computers. Everybody obsesses about GPUs, which are primarily the product of TSMC out of Taiwan high end processing nodes. People forget that you also need something called DRAM, dynamic random access memory. It’s a high end memory chip, and the Koreans make almost all of those, all the good ones anyway, and are really the only ones researching how to make better ones. So whereas Biden and now Trump are pushing to get GPUs produced in the United States have kind of forgotten about the other piece of high end computing. And without the Koreans, it’s just that goes away. Third, yes, Korea is a security beneficiary, but they’re not a free rider. In fact, aside from North Korea, special case because they impoverish their people, making them eat grass in order to have a big military with 25% of their population under arms, and Ukraine and Russia, which are in a hot war, the Koreans have regularly outspent everyone on the planet going back to 1950. Yeah. 

But they have focused at American insistence on defensive weaponry and on short range weaponry. So they don’t have a ballistic missile program, they don’t have an independent jet program, and they certainly don’t have a big naval program. So Trump called out in his Truth Social post about how the Koreans refused to assist in the denuclearization of Iran. And let’s put to the side first, that the Trump administration, six months in, still doesn’t have a plan for that. 

The South Koreans guess how many ships they have that can make it to the Strait of Hormuz? Zero. So, I mean, what were they supposed to do? Swim. 

Now, if the United States really is backing away, and the South Koreans are going to have to face the North Koreans alone and defend themselves in a neighborhood with superior military forces like Japan and China themselves. Well, they’re kind of in a similar situation to the Europeans. There’s no point in them getting a lot of artillery and tanks and rocket systems and jets, because it would take too long to build. And the Trump pullback is being so rapid that just won’t work. So they’re doing two things. Number one, they have a very aggressive partnership with the Ukrainians to mass produce drones. Expect to see a lot more of that. So the marriage of South Korean technical skill and manufacturing prowess with Ukrainian innovation and field testing, we’re going to see a new generation, several new generations of advanced attack drones and offensive drones that the United States now will not have access to, but will form the backbone of this new Korean military structure. 

Second, there’s one other thing that they can do that has a big bang for the buck and you can do pretty quickly, and that’s built nuclear weapon. The Koreans have always tried to stay just a couple of steps shy of weaponization, because they were never quite sure in the long run, if the United States was going to stick around or not. 

Now, they more or less have an answer to that question, and that means we’re going to have a third nuclear power in Northeast Asia. If the Koreans decided to pull the trigger today, they could have a device in days. They’ll probably be able to have a deliverable nuclear weapon within months. And then this strategic balance that existed in relative peace in Northeast Asia for the last 75 years. You can kiss that goodbye, because then the Taiwanese and the Japanese really will have no choice but to follow suit. So there we are. I would love to say that there’s some sort of strategic goal here the Trump administration has. Unless it’s having dinner with the North Korean dictator, I don’t see what it could possibly be. 

And that’s all I’ve got for now.

Leaving the World Behind: Obama vs. Trump

Portraits of Trump and Obama

The Obama and Trump administrations have both made deals with Iran. There are some glaring differences between the two, so let’s see which deal came out on top.

Obama’s Joint Comprehensive Plan of Action (JCPOA) failed to address Iran’s missile program or its support for regional proxy groups, but limited Iran’s access to frozen assets, maintained broader sanctions, required inspections of nuclear facilities by the International Atomic Energy Agency, and sought to create a regional balance of power. Trump’s deal is substantially weaker, as it allows Iran to sell oil freely and access the U.S. financial system with limited oversight, lacks long-term safeguards on Iran’s nuclear program, and leaves Iran without a proper framework to engage with the region.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado. Due to popular demand. I’m going to do today. Compare and contrast of an agreement called the JCPoA, which I don’t remember what it stands for now, but it was the Obama era deal with Iran versus what the Trump administration has just done. Let’s start with the review of JCPoA. 

It is held up as kind of the landmark example of how to not negotiate with a difficult country like Iran. There were insufficient safeguards. Most of the issues that really mattered to the United States were not addressed. It was considered kind of the first stage of a series of negotiations to try to normalize relations with the Iranians. And as such, it was ultimately abandoned. 

And most independent observers looking back on it now, ten years on, would give it a degrade in terms of its overall quality. So why is that? There are a number of things in the bilateral relationship that matter. Obviously, there’s a lot of things we disagree about, but near the top of the list are sectarian groups that are on sponsors to foment chaos throughout the region and its missile program, which is designed to not simply threaten Israel but ultimately broader American interests. 

And in time, maybe even the United States and JCPoA addressed neither of those at all. But neither did the Trump administration. There’s not a single word about any of that in the very short napkin deal that Donald Trump put his name on so famously in Versailles. That’s piece one. Piece two is finance. The United States controls the global financial system, and almost all commodities are almost exclusively settled in US dollars. 

That means the United States has eyes on any transaction that uses any dollars. And honestly, on almost all trade period. Because if you’ve got two countries that don’t have a lot in common executing a trade deal like say, I don’t know, Oman selling crude oil to Korea, the Omanis don’t have anyone and they don’t want anyone, and the Koreans don’t have any Omani dinars and they don’t want any. 

And so what they do is they take their dinars. I think it’s called a really not sure offhand. Maybe I should have picked Mexico anyway. Exchange them for U.S. dollars on the international exchange, and then it goes back to one when it hits Korea. And in doing it that way, the United States actually gets two points of view on every individual transaction. 

Anyway, Iran had been under a degree of sanctions for decades. And so the Obama team offered up progressive relief from sanctions in exchange for cooperation on the other big deal nuclear issues. And so to that end, the first stage was unlocking some of the cash as an act of goodwill that Iran and had frozen all these years came out to something like, I don’t remember the name or number off the top of my head. 

No WiFi here about, let’s call it $20 billion. I think that’s about what it was anyway. 20 to 30. Anyway, that was loaded up into pallets and flown to Tehran, which is something that Obama’s critics screamed bloody murder. You’re flying cash pallets of cash. And the response, which was accurate, was that access to the financial system, which would have allowed Iran to sell its crude on the open market and get all the cash direct and use it for whatever it wants? 

That would have required loosening up the sanctions in a way that the Obama team didn’t want to grant right off. That was probably for phase two or phase three or phase four. So the only option was to fly some of Iran’s cash. That was Iran’s. Anyway. 

Anyway, it was an awkward deal that really had bad optics, but it was probably the best. Could it be done at the time? In contrast, the Trump deal just gives a very similar amount of cash in the 20 to $30 billion that is frozen directly to Iran in US dollars and grants them full access to the US financial system and allows Iran to sell whatever it wants to on the international market and earn US dollars that are not under US jurisdiction or monitoring or in any sort of temporary account, so we can watch where it’s spent. 

It’s basically gave her on everything that’s been demanding since 1979. Which brings us to the nuclear question. That was the big achievement of the Obama deal. Is it committed Iran to IAEA inspections? IAEA is the UN bureau that monitors everybody’s nuclear power plants and makes sure that you’re not taking some of the fuel and turn it into what would go into a bomb. 

The Trump deal does mention nukes, but it says it’s all subject to a 60 day deal, and there’s no restrictions on them at the moment. In addition, the Iranians felt that they wouldn’t be attacked because they had a nuclear program. Now they know they need to have a nuclear bomb to have a deterrent. So we’ve basically incentivized them to build a nuke. 

Well, whereas the Obama deal, while there were multiple rounds and we were only in the first round, was definitely weak and insufficient and a bad deal. It’s nothing compared to the strategic abdication that the Trump administration has just done on financial and nuclear issues. 

The core logic for the Obama deal, and you can you can argue with it, is that if you’re going to withdraw yourself from a broader region that you have been managing for decades. Unless you just want to let the chips fall where they may, you need to do one of two things. Number one, you have to appoint a deputy or a new regional hegemon to take your place, a country that you trust enough and that has enough capacity to hopefully do things more or less in the way that you would. 

And There was no one. There is no one in the region that checks those boxes for the United States. Israel isn’t trusted, and besides, its power projection is limited in a sustained way. Sure, it can bomb someone, but it can’t hold territory except in Lebanon, Saudi Arabia. The military is a joke. Turkey is on the wrong side of Iraq. 

There’s just no one. Which leaves us with option two. You have to set up a regional balance of power that self regulates so that the region’s problems stay the region’s problems. And that was the approach the Obama team seized upon. And that required a degree of normalization of Iran so it could act as a normal power. The Trump administration’s deal is basically a wash your hands and walk away and what happens, happens. 

And so things like the war in Lebanon, things like the human rights disasters that are Saudi Arabia are the sponsors of terror, that are the Guthrie, Qatari, whatever. And everything Iran does in his infamous for just like it’s left. 

So yeah, the Obama deal will go down as the quintessential example of a grade D statecraft, a horrible deal that didn’t take all that many American interests into account. But we’ve all been through school, and we all know there’s a grade below D, and that’s where we are now.

The U.S. Can’t Break the (Arctic) Ice

Ice floating in the Arctic Circle

Despite the growing importance of the Arctic, the U.S. continues to move further away from a sustainable operating plan.

The USCGC Healy broke down during sea trials, and the Polar Star is undergoing its own refit, which leaves the U.S. with one operational icebreaker. Clearly there is a hole in U.S. Arctic strategy, and attempting to plug it with the goodwill of Canada and Finland (given strained relations) might leave the U.S without a long-term solution.

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Transcript

Hey, everybody. Good morning from Colorado. This is Peter Zeihan. Today we’re going to talk about how the American Arctic strategy collapsed over the weekend. The United States only has a small Icebreaker fleet. And the biggest of them, the Healy, was undergoing high speed trials after a repair cycle, and the engines crapped out. The crankshaft broke. 

There was a bit of a fire and it basically stalled out and had to be towed back to port. We don’t know how long it’s going to take to get it back into operation, but it will be at least the remainder of this year. And this is after a series of other mishaps that involved an engine room fire and a transformer fire. 

The ship has not been doing well since it came on line 20 years ago. Second, you got the Polar Star, which is over 50 years old, and its only job is to run supply runs to Antarctica to supply Fort McMurdo, McMurdo base, if you prefer. That’s it’s only job and it is now completed that most recent cycle and has begun its own refit. 

That just leaves a ship called The Stories. Now, Coast Guard vessels are in that gray area there. It’s a middle branch of the military, but the ships are kind of a civilian military hybrid, oftentimes not for the stores. The stores is a flat out civilian vessel in construction. It’s an oil tug that’s been converted. And it is now the only ship the United States has. It’s an icebreaker. Whether you’re looking at global warming and new routes, whether you’re looking at competition with the Russians or the Chinese, this is basically bad because the United States no longer even has a ship in the game. And the backup plan, while wise under normal circumstances, probably isn’t going to work out. You see, under the Biden and later Trump administration’s Trump to the United States basically signed a series of agreements with the Canadians of the Finns to build icebreakers for. 

You see, we don’t even have a shipyard that can build them anymore. And that would be great, especially now that Finland and NATO. But the two countries that the Trump administration has threatened most directly and most repeatedly are Canada. Canada is not going to help us build an icebreaker fleet that could then circumvent Canadian power in the Arctic. 

And then there’s Denmark. You know, the whole Greenland thing. Finland is a very tight ally of Denmark. And if the United States seizes Greenland, we can basically kiss the entire Scandinavian block a goodbye. So basically, we are looking at a period for at least the next 30 years. We, the United States, does not have a military presence on the waters in the Arctic. 

Whenever there’s ice, we can still sail up there. In the summer, we can still use air power, which is of limited use on the water. But other than that, we’re looking at the United States not even having a tool in the box. And at a time where the world is in churn, to not even be able to play is a real problem. 

And this is something that will resonate well, well throughout the remainder of this century. So, you know. UGG.

Why Nobody Came to Help the U.S. in Iran

Toy Tank Atop Iranian Currency and Flag | Licensed by Envato Elements: https://app.envato.com/search/photos/3abc94ac-73db-4912-ae0d-3e507dd11191?itemType=photos&term=iran+war

Despite the large rolodex of U.S. allies, nobody has pulled up to the Persian Gulf to support the U.S. There are several reasons for this, though.

Part of the post-WWII deal was that the U.S. would provide global maritime protection, so nobody else had to; as a result, few powers could help out, even if they wanted to (like Japan, the UK, and France). It doesn’t help that the U.S. launched this operation without consulting anybody, but even if they had, most allies wouldn’t touch a Persian Gulf conflict with a ten-foot pole.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Colorado. Today we’re taking a question from the Patreon crowd, specifically considering how dependent countries like to Pan and the countries of Europe are upon energy imports, specifically from the Persian Gulf. How come they haven’t been helping out with the conflict? Well, let’s look at it. First of all, not a lot of countries maintain naval forces that are capable of rapid projection. 

You basically have them on a degree of standby until something big happens and then everything has to be spun up. So, for example, unless you’re the United States very special case, everybody’s navies are pretty much limited to coastal patrol. So if you do have a long range ship, it’s probably just sitting in dock until it’s needed. And then it’s going to take a few weeks to a few months to get it ready to go. 

That’s one. Number two. The deal that we struck with everybody at the end of World War two was that we will patrol the global oceans and keep the ceilings open for everyone. If in exchange, you allow us to control your security policies. And part of us controlling your security policies is we don’t want you to have any long range power projection, because if you have a long range power projection, you’re going to use your long range power projection. 

You might use it in ways that we don’t want. So with the exception of Japan, which is an island nation and has the second largest navy in the world, and the United Kingdom, which has a bit of an imperial hangover, the only other country in the world that maintains really any long range capability that’s independent is France, and that specifically. 

So it has an independent capacity. So really we’re talking here about three countries. No one else could have even helped if they had wanted to. Which brings us to number three a burden sharing intelligence, sharing whatever you want to call it on February 11th. Netanyahu, Benjamin Netanyahu, the prime minister of Israel, came to the white House, made a pitch to Trump for the United States and Israel to jointly attack Iran. 

He said the war would be over in four days. We can kill the leadership because you know where they are. There will be a revolution. They’ll probably rename the capital to Trump Obelisk, and you will go down as the bravest and most capable American president in history, and you will do something that all the cowards before you refused to do. 

And Trump looked around the room and everyone who knew something about foreign policy, for example, Secretary of State Rubio and the Joint Chiefs of Staff Dean Cain said, Mr. President, this is an horrible idea. We’ve been hearing some version of this for 30 years, specifically from Netanyahu, who has tried to convince multiple American presidents to fight his war. 

For him, the math never checks out. The Strait of Hormuz will be wrecked. But, Mr. President, it’s your call. And then the people who knew nothing about foreign policy, notably Pete Hegseth at defense, said, do it. 

The carrier sailed later that day. So normally when the United States goes to war, we compare intelligence with our allies. That never happened this time. And we now know, even from within the white House four months later, that there wasn’t any intelligence. This was just a pitch deck from Netanyahu, who has been chomping at the bit to get the United States to fight his war for a long time. 

So normally we’d like consult with NATO, especially with the Japanese and the Brits, and we’d arrange for a coalition to put at least a veneer of internationalism on top of whatever it was that we felt we needed to do. None of that happened. So the war began a couple of weeks later. Just just the amount of time that it took to sail to get there. 

And then about in week four of the war, when the Trump administration realized it wasn’t going well, which was difficult because DoD was only showing him like strike footage, because any time they tried to give him an accurate assessment of how this was not going well, he’d kick him out of the room. Well, by four weeks on, it was starting to come at him from all angles that it wasn’t going well. 

And that is when he started yelling at the allies to send forces. But as I’ve mentioned, no one else has forces to send, and the few that might certainly in a hot situation are not going to be sending things through Suez. So even if like, say, the French and the Brits had snapped to at that instant, unlikely they would have needed a month or two to get their forces ready to deploy, and it would have been over another month before they would have actually arrived. 

And in the meantime, you know, Iran went the way Iran did. And we’re now in a situation where we get final point is that nobody outside of Trump and Netanyahu wanted this war in the first place. We now know unequivocally that Iran’s drones are more than capable of taking out every piece of physical infrastructure throughout the Persian Gulf, which can trigger a global energy induced depression. 

We now know that their monitoring of the entirety of the Strait of Hormuz is strong enough that they can even take occasional shots at ships that are hugging Omani waters on the southern side of the strait. And really, even with the US Navy concentrated on the Strait of Hormuz in the Persian Gulf, there’s not a lot it can do, because if those ships stay still, then they become targets to. 

So we’re in this never ending negotiation where negotiations aren’t actually happening. Because this is just horrible. Normally when you’re having a real negotiation, you have your headliners who do the real talks and what are called technical folks do the technical talks so that when the headliners show up, there are only real things to discuss. 

Well, Trump has shut the Department of State to the side and refuses to deal with that at all. Even that’s where most of the policy experts are. 

He made Secretary of State Rubio be in charge of all that because he doesn’t like Rubio either. So all you Rubio fans who think that he might be the successor to MAGA, think again. He also doesn’t like the National Security Council. That does kind of have all the deep thinking as opposed to the diplomacy. 

Not so it could be more efficient in the way that Kissinger did it, but to shove it all to the side. So there were no negotiations with the allies on the front end, and there’s no technical talks happening with the Iranians on the back end. So the last time that Trump’s preferred negotiators, Jared Kushner and Steve Whitcomb, went to Doha this past week, they got to Doha and the Iranians like, yeah, not this week. 

We have technical talks to do. And so there’s still nothing happening. There have been no technical talks since this whole thing started in February. Anyway. If you’re an ally and you’re looking at this, you’re like, why would I develop a military capability that the United States has until now, said I should not have in order to use it to prosecute a war that hurts my economy. 

And then we are at the mercy of a diplomatic situation that doesn’t have diplomats. So, yeah, no, the allies haven’t done anything here that is untoward. We’re just in a bit of a trap caused by a man who refuses to surround himself with anyone but sycophants and is very, very easy to manipulate so long as you’re willing to lie to him, which is not what a good ally does. 

All right, that’s it for me. Until next time.

The End of NATO

Flag of NATO

The Trump administration has said that it is now policy to not send meaningful reinforcements to Europe in case of a military conflict. Most notably, super carriers, carrier aviation, extra fighter jets, aerial refueling, airlift capacity, air defense, and precision munitions. 

It guarantees a divergence in training, doctrine, and the ability of the various countries of the alliance to function as a unit. For all intents and purposes, NATO is now gone.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. Today we’re talking about NATO, specifically. The US Defense Secretary, Pete Hegseth, just changed the mechanics of what the United States might send to might send to NATO in case of a military emergency. You know, a war and the short version is very, very little. No carriers, no carrier aircraft, no precision munitions, no logistical supply, limited satellite support.

In essence, Hegseth says that the United States wants to operate as if a war with China would happen at any time and any assets that we might need to fight. China can never be deployed anywhere else. That’s the official statement. The unofficial statement is after the Iran war, the United States has lost the capability to even pretend to fight more than one war at a time, and the one war that it would fight.

If you’ve chosen to preposition everything for China and China only means that you really can’t intervene anywhere else. We had talked earlier about how the way the Trump administration fought the Iran war would basically excise its power from the Eastern hemisphere. We are seeing that in real time now. And politically, the Trump administration has made the decision that Europe is on its own.

So where does this take us? Well, number one, it means that the US alliance, the NATO alliance might still exist on paper. But if the United States is already saying before conflict even begins it, very little and certainly none of the assets that the Europeans don’t have are coming. That’s that’s pretty much the end of things. The plan for NATO going back to 1949 has been that the United States will develop certain broad area competencies, and then the Europeans won’t.

And we did that in order to make sure that the Europeans were always dependent upon us. And in the case of a fight, we would command all of their militaries. That has now ended. So the United States just lost force projection in Europe. And as the Europeans now retool to do what they can, we’re going to lose interoperability.

You see, the issue is that the United States weapons systems are designed for very, very long range and then durability upon arrival. But that’s not the sort of fight that the Europeans would ever find themselves in. So the Europeans have purchased American weapon systems in order to maintain interoperability with the country that will ultimately be commanding their troops in a hot fight.

If those forces if the American forces are not coming, there’s no point in maintaining interoperability. And if you play that forward into a world where drones are up and rising, the Europeans don’t have the 1015 years it would be necessary to build an American style force with American style weapons that can’t be built that fast. So they’re going to be doing Ukrainian style weapons that can be built in weeks to months, probably backstopped by a multi-state nuclear deterrent.

How that is managed? TBD, which means that in as little as a year from now, the European and the American militaries are not going to be interoperable anymore. And if they do decide, for whatever reason, to operate side by side, they’ll be doing so with different command structures and different doctrine, which means that now, in addition to the political decision in Washington to end the alliance, the Europeans are going to be forced to make procurement decisions that would functionally end the alliance anyway.

So NATO had a great run. We are now entering the great unknown of strategic breakdown and realignment, and the Trump administration has made sure that Europe and the United States are in opposite sides of that.

We Have a Peace Deal! Sort of…

Flags of the United States and Iran blending. Licensed by Envato Elements

It looks like we finally have a peace deal between Iran and the U.S. (and maybe Israel). Neither side can agree on the terms, so it’s really more of a tentative agreement to stop shooting at each other…at least for now.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from the San Luis Valley in southern Colorado. I’m on my way to New Mexico, and I just heard on the radio that we have a peace deal between the United States and Iran. So I went till I get a blip of data and. Yeah, no we don’t. Okay, let me outline the five big things that supposedly there’s agreement not agreement on. 

Number one, the Strait of Hormuz itself, the idea both sides say that it’s going to be open. The Americans say there’s going to be no charge whatsoever for anyone passing through. Iran is confirmed that there will not be tolls. There will be a service fee that is higher than the tolls they’ve been charging. So air. Number two, Israel’s included, according to the Iranians, and not included according to the United States. 

In fact, in the time it took me to get my blip, the Israelis have carried out several strikes throughout the country. 

number three, the nuclear program. The United States has said that the Iranians will close the entire thing down, and that all the enriched uranium in the country will be removed and spun down to what you would use for power, fuel. 

The Iranians have said no, not even remotely. It’s never leaving the country. We might spin it down to 30% enrichment. By the way, you need 95% for a bomb and only 3.5% for nuclear power. But that’s it, then. Sanctions. Iran says that they’re all lifted immediately in the United States. This says they’ll be lifted in stages, with the first phase being lifted maybe in 60 days, assuming the Iranians behave. 

And then, number five, restitution. The Iranians say that the Americans have agreed to $300 billion of investment to compensate for launching the war. The Americans made no mention of that. The Iranians also said that $25 billion of frozen assets will be freed immediately. And the United States has said, you know, in bits and pieces over the next decade, maybe. 

Why so far apart? I mean, actually, these positions are further apart than we were back in February, the day before the war started. The key thing to remember about all of this is number one. The Iranians are always bastards when it comes to negotiating. Everyone has been trying to hold talks with them in some form for over 40 years. 

And so the idea that this time it was going to be quick, please. Second, there’s not a single American involved in these talks. It’s not just that we have a Pakistani field marshal doing the negotiating. It’s being moderated by Qatar and Saudis. However, the United States does not have an ambassador in Pakistan or Saudi Arabia or gutter or Kuwait for that matter. 

So everything is happening like a game of telephone, three steps removed from any American. And then the State Department isn’t involved because there are no ambassadors. So it’s not a surprise to me that this isn’t going anywhere. What’s the surprise to me is that anyone else thinks it might be going somewhere. Markets, of course, have exploded and all is down, but there’s no reason to think that this is going to be any different. 

If you just need something to underline that, the documents will be signed in Switzerland on Friday remotely, the Americans and the Iranians can’t be bothered to show up. So no, this is not the end. All they’ve agreed is they would prefer to stop shooting at one another. We’ll see how long that lasts.

DHS Gets Funding… A Lot of Funding

DHS building in Washington DC | Photo by Wikimedia COmmons: https://en.wikipedia.org/wiki/United_States_Department_of_Homeland_Security#/media/File:DHS_St_Elizabeth's_Building_1.jpg

ICE and DHS just got approved for a new funding package that expands resources for immigration enforcement and border security. My primary concern is the economic impact of this new funding, rather than the politics of it all.

The U.S. workforce is already under immense demographic pressure, and introducing stricter immigration policies will only worsen labor shortages (especially in sectors that are heavily reliant on immigrant workers). This means higher costs, reduced service levels, and baked-in inflation for the remainder of the decade.

The political side is concerning as well, but Trump’s attempts to limit congressional leverage are nothing new. Just another signal that U.S. power dynamics and party structures are in flux, as more decision-making power is falling into the hands of the executive branch.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today is the 11th of June, and the news is that the US House of Representatives has given final approval to the new Department of Homeland Security budget. What can I say about this? It will go to the president’s desk. Now. He’s expected to sign it. It includes within it a rough quadrupling of funding for immigration, Customs Enforcement and border control. 

That’s on top of the $75 billion that was part of the big, beautiful bill from last year. And this is for an agency that normally has a total budget of about $10 billion. So over the four year term, this is about a quadrupling of the budget. Now, lots of people are going to say lots of things about immigration and human rights and thuggery in general. 

I’m going to leave those topics to them. Not that they’re pointless, but they’re just not mine. I want to hit this from the point of view where everyone is going to feel it. The United States now is seeing more of its population dying than being born, and the largest generation in American history. The baby boomers are mostly retired, and by the end of this decade, they will all be retired. 

Which means that if you want a growing labor market and the growing economy that goes with it, you need to get the people from somewhere other than natural birth. And the only option until we have cloning, like really good cloning, is immigration. And with this sort of system, at least for the rest of this decade, that’s functionally impossible. 

So that means that every pressure you’re feeling in the economy on the affordability question is about to get significantly worse, because there just isn’t going to be enough people to make everything function. Industries that’ll be hurt hardest. Our agriculture services and health care and construction. Those are the places where people who are not born in the United States tend to carry a disproportionate load. 

So for those of you who are older, look forward to spending lots of long hours and hospitals in a bedpan that hasn’t been changed. For those of you who like to move into new homes, get used to those being significantly more expensive because we won’t have the labor to build them. And for those of you who are used to going to things like restaurants, expect those tables to not turn around because there’s nobody cleaning the dishes. 

And in agriculture, we’ll still be able to do row crop pretty well. But as you get into, say, meats where people are, the animals have to be herded. That’s usually done by immigrant later. And when you’re dealing with fruits and vegetables, where that has to be handpicked immigrant labor as well. So everything gets more expensive on a secular basis now. 

And even if the day Donald Trump leaves office or this term ends and Ice is more reformed, if that’s the right term, and all of a sudden immigration picks back up to something that’s closer to the half century average, it will take another ten years for that to feed into the system. So we are guaranteed now to have significantly higher inflation than we needed to. 

That’s piece one. Piece two is that this is not an annual budget. This is a budget that is designed to fund these agencies through the remainder of Trump’s term, outside of the normal budgeting process. Now, under normal circumstances, Congress would never agree to this because that takes all of the power away from Congress. Congress has the power of the purse, the House specifically, and transfers it to the executive for the remainder of the term by the time Trump signs this, it’ll be codified into law. A couple things from that. Number one, the executive now has full authority to use this however he wants. Congressional check is gone. We’ve been talking on and off for the last few years about how the United States is going through a political transition, with both the Republican and the Democratic Party basically breaking down. 

This basically completes that process for the Republican Party. Trump has ejected a number of high ranking senators and House members via primaries. They’ll be gone in November, and the number that remain are going to be so isolated that they really can’t do anything. They’ve had this last stand, this last two weeks, where they’ve stood up to Trump on a number of issues, and now that is effectively over because they’ve lost their leverage. 

That means that the Republican Party is gone. It’s no longer the party of business or national security or rule of law, certainly not a fiscal conservatism. And this will accelerate what’s next, because we’re not going to have several years of the political right in the United States being completely nonfunctional outside of the person of Donald Trump personally, from a Democratic point of view, from an organizational point of view, this is generally pretty bad. 

It also means that whatever his whim is, is now state policy. And there are really no checks in the congressional branch of government. And so we’ve been seeing these cavalcade and compounding mistakes by Trump, whether it’s in negotiations with Iran or with Russia or domestic regulation or with the tariff policies. All of that is going to accelerate now, because the last of the folks who might have provided some ballast are gone now. 

And this law means that he doesn’t even have to consult anybody. Which means it really doesn’t matter to me what happens in the midterms. Because Trump has barely gone to Congress at all in his first year and a half in office. And now that he’s gutted what’s left of the Republican Party, and even if the Democrats managed to retake both houses of Congress, why would he go to Congress again when the priorities he has have already been funded for the rest of this term? The only way you could change that is if Congress decided to rescind this funding. But that would have to overcome a presidential veto, which requires a two thirds majority. 

So that’s just not going to happen. So all hail the King. He’s got what he needs to do, whatever he wants on the issues that he cares about as long as he’s alive or in office. And yes, there is some gray area between those two.

Insulating the President with Loyalists

Bill Pulte, New Director of National Intelligence official portrait

It looks like we have a new acting Director of National Intelligence, Bill Pulte. You may know his name as he’s both a housing executive and the current head of the Federal Housing Finance Agency.

So, we’ve got a new Director with at least two full-time jobs and no meaningful experience in intelligence…yeah, that sounds about par for the Trump Administration’s nominations. But at least Gabbard is out of the office.

Anyways, this move will likely result in the intelligence agencies losing influence in presidential decision-making and reinforces the trend of Trump isolating himself from anyone smarter than him.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from Vegas. Had to find a quiet corner for this one was a little hard with all the people running around anyhow. Today we’re talking about the new acting Director of National Intelligence. Guy by the name of Bill Pulte. If you’re familiar with homebuilding, Pulte homes that Bill Pulte. He already has a position in the government. 

He’s a Trump loyalist. And he’s appointed to the civic of this right FH for the Federal Housing and Financing Agency, which is responsible for, among other things, back stopping about 70% of American mortgages. So big job. And most of the insurance agencies under FHFA, most notably Fannie Mae and Freddie Mac, are in conservatorship and have been since the financial crisis. 

So it’s a big, important full time job. The fact that he comes from housing and is now managing the mortgaging system suggests a conflict of interest. When he was going through confirmation hearing year, several senators piped up about that, most notably Elizabeth Warren. But you know, she hates everybody, so it’s hard to take that too seriously. 

Anyway, he has now been deputized as the acting head of national intelligence, and his job there is to coordinate the dozen plus federal agencies that have intelligence arms, everybody from the NSA and the CIA to law enforcement. Anyway, that is a full time job as well. And what it really tells us is President Trump, doesn’t really care about the national security agencies at all, and he certainly doesn’t want them talking to him about what’s going on in the world. 

Trump feels the need to be the smartest person in the room. And if somebody from the intelligence agency is there talking about Moldova or Kyrgyzstan or Bolivia, they will obviously know them more than the president about that topic. And so they’re just not allowed into the room. Now, the outgoing director of national intelligence was Tulsi Gabbard, who had some foreign leanings and so seen her gone as great, but now replacing her with somebody who is completely unskilled and there’s no background in intelligence or military affairs or project management is really not great either. 

About the only good news I can say is at least this guy is not beholden to foreign interests like Tulsi Gabbard was. He’s a loyalist, so he’s unlikely to tell Trump anything that he doesn’t want to hear. Which probably means that all of the intelligence’s basically now have a ceiling above them, between them and the president. So Trump is continuing to go down this path of being the least informed leader that we have had in modern history. 

The only other one that is even remotely in the same bucket would be Barack Obama, who was famous for not wanting anyone in the room at all. This is just the other side of that coin. So good news. Not really. But considering that Donald Trump doesn’t have anyone in his circle with real foreign policy experience except for Marco Rubio, who has similarly been banished and now heads two agencies State Department, for the similar purposes of keeping him in arm’s length from the president, keeping those institutions away from the president. It’s kind of par for the course.

The U.S. Gets a Taste of Corruption

Photo of a bronze trump doll on stacks of 0 bills

Trump is no stranger to helping out his cronies, but this new settlement that creates a $1.8 billion fund to compensate conservatives allegedly targeted by past Justice Department actions is a bit on the nose, even for him.

This slush fund is a reminder of the legal and regulatory erosion that the Trump administration is responsible for. The rule-of-law system that has supported the U.S. economy and government is now on some very shaky ground.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Vasto, Italy. Today is the 18th of May. You’ll see this later in the week. Short version is. We’ve probably had the single biggest step backward in rule of law in the United States of the second Trump term, which is, you know, saying it’s saying something in of itself. And the fact that I’m telling you this from Italy is a little concerning. 

The short version is today, the Trump administration settled a lawsuit that had brought against the US government while Trump was president. So basically Trump suing Trump and then settling with Trump to establish a slush fund of about 1.8 billion USD. Technically, it’s $1,000,000,776 million to compensate conservatives who have been prosecuted by the Justice Department in the past. Everyone who has been shortlisted to get a payout, as somebody who is one of Trump’s close political allies and in essence, this is a slush fund. 

This is the sort of operation that people in Italy have been telling you, like even the most crooked of our politicians would have never dreamed of doing something so obvious and brazen. This has a lot more in common with how Nigerian governments in recent decades have handled slush funds, basically suing yourself, controlling both sides of the negotiation, and then handing out the money to whoever you wanted to in the first place. 

Although even Nigeria has moved away from that model in the last 20 years, the most recent governments to do things like this were Nicolas Maduro of Venezuela and Hugo Chavez. This is hardly the first time the Trump administration in round two has done this. I really doubt it’ll be the last. The judge that oversaw the settlement basically said in legal terms, what the actual fuck? 

But here we are. This is what happens when you have an executive who sees the rule of law as part of the problem, rather than part of the solution. We should expect significantly more things like this. And this kind of dovetails with what has functionally happened with the tariff situation. Whereas the tariffs policies have changed so often that the only way that you can stay ahead of them is to have a really good relationship with the regulator, which is another way to say bribery. 

What was the other comparison I wanted to make? Give me a minute. It’ll come to me. Oh yeah. On the regulatory question, the Trump administration has gutted several of the regulatory bodies so that enforcement of the regulations that are on the books, even some of them from Trump, one can’t really be done in a timely manner, but they’re not bothering to staff these agencies with people who could strip out regulations from, say, the Obama or the Biden years. 

They’re just telling companies to not abide by them and put themselves in deep legal jeopardy that that a future administration might come after the before. But the Trump administration is saying, you know, all you have to do is not follow the law in its current form, and we’re not going to prosecute you. So it’s breaking down the rule of law that allows us business to be the most dynamic in the world. 

And basically following a model that the Russians had during the 1990s and the 2000, where you deliberately have conflicting guidance from the Kremlin and from law and from regulation, and the only way to stay on the positive side of that is to bribe everyone in sight. So mazel tov from Italy, a country that used to be run this way but found a different way.

MAGA – Breaking Up Is Hard

President Tump with a MAGA face mask over his mouth

When Marjorie Taylor Greene, Tucker Carlson, and Alex Jones all turn on Trump on the same day…it’s worth looking into.

These figures have all suckled at the MAGA teat for years, but it seems the milk may have finally soured. But is this really all an organic change, or is there someone pulling at the strings behind the scenes? It makes an awful lot of sense for the Russians to cause fractures in MAGA to weaken the U.S. position.

They say breakups are hard, so we’ll see how MAGA and the broader U.S. political sphere handle this fragmentation.

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Transcript

Hey all, Peter Zeihan here. It’s the 11th of April. I’m coming to you from Colorado, and today we’re going to talk about what’s happened in the MAGA sphere over the last about seven days, we have had a number of personalities, ranging from Marjorie Taylor Greene to Tucker Carlson to Alex Jones, Nick Fuentes, to. Oh, who was that really crazy bitch, Candace Owens? 

Oh, my God. Anyway, some of the worst of the worst, people who have been spouting propaganda and, lies and incrimination and just making up all kinds of conspiracy theories for the last decade, all of them have turned on Trump all at once, and they’re now all saying things that, you know, honestly, would come out of the squad on the Democratic left really? 

Well, calling Trump a mad king, genocidal evil. My personal favorite. He’s probably the Antichrist. Let’s start by saying that none of these are nice people. All of them are horrible. And all of them have basically lied to all of their followers for a long time. So if you’re a follower and you’re seeing this, you have been had over and over and over and over and over again. 

But the fact that they all switched almost on the same day tells me that this is not a one off. This is an organized effort. Now, every single one of these people, if they’re not active Russian agents, the Russians have a pipe into their brains where they’ve been funneling propaganda that they may go on to vomit in front of their followers. 

Nothing’s new there. That’s not particularly controversial, even for them, but for them to all switch at the same time. That suggests that the Russians, since an opportunity, see, one of the things that people get wrong about Trump and the Russians is that Trump doesn’t owe Putin and Putin doesn’t control Trump. Trump is just really easy to manipulate, and Putin has been manipulating him. 

Now Putin has used all of these conspiracy theories to break up the Republican Party from the inside, basically break down the capacity of the business interests and the national security interests and the fiscal voters to basically control the rest of the party. And so it’s turned over into MAGA. And that means that MAGA is the single most coherent voting bloc that the United States has right now, arguably the largest and most consolidated voting bloc that the United States has ever seen in its history. 

And as the most powerful force in American politics, that puts it on Putin’s radar, because Putin’s goal has never been to get a friendly person in the American presidency. Putin’s goal Russia’s goal has always been to break the American political system so it can’t function. And if MAGA is now the most powerful part of the American political system, then it is now a target. 

And with the Iran war, the Russians have sensed an opportunity. So the goal isn’t for Putin to go after Trump per se, but to break the capacity of market a function. And if that drives the line between MAGA and the president, so much the better. So he’s using these people who have been borderline to outrageously, traitorous over the last few years to now turn all at the same time and basically set the Trump alliance on fire. 

It’s a good strategy. It’s a really good strategy because there really isn’t anything else coherent in the American political system right now. The question, of course, is whether Donald Trump realizes that this is how it’s been all along, because he’s always assumed that all of these people, including Putin, worship him. That’s never been true. And he’ll have to do an ego adjustment if he wants to come to grips with what’s happening now. 

But it’s unclear whether Trump has mentally degraded too far to even absorb that simple fact. And if he hasn’t, then we really are not just looking at the end of the Republican Party, which I would argue already happened. We are looking at the end of MAGA as a unified political force. Whether that is good or bad, of course, depends upon how you view the country, the world, American politics and how things are going to evolve or devolve in the next year.