South Korea and the US Make a Nuclear Deal

Midshipman looking out the cockpit of a submarine

The US and South Korea have struck a deal for the US to help build nuclear-powered submarines for the Koreans. The US has kept this technology close to the chest for a long time, with the access list now a whopping two countries long: Australia and South Korea.

So, what does this mean for Seoul? Well, nuclear subs don’t exactly make sense for a conventional showdown with their neighbors to the North; however, the South Koreans have maintained the ability to quickly ramp up their nuclear industry. And the strategic implication of submarine-launched nukes accessible within a year really spices up the conversation.

Should the South Koreans be the first to topple the nuclear domino in Northeast Asia, you can bet your ass that everyone else will follow. How that plays out, nobody knows…but we probably won’t have to wait long to find out.

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Transcript

Hey, all, Peter Zeihan here. Coming to you from Colorado. And today we’re talking about something that happened last week. We have a new agreement between the South Koreans and the Americans for the Americans to build and help build nuclear powered submarines for the South Korean Navy. And this is, really interesting. Now, the United States generally keeps a very tight lid on this technology was first developed in the 1950s, and it is the core for all of our ballistic and attack submarine fleets. 

The big difference between a conventional sub and a nuclear sub is a conventional sub has basically service for every once in a while, and has a limited range and a limited duration of mission because it always has to come back and get more fuel. Whereas a nuke sub can basically stay under indefinitely and regularly, runs at least six month missions. 

It’s really more an issue of the crew going completely batshit crazy because they’ve been underwater for so long, rather than a technical restriction. And of course, food stores, things like that. 

To date, there’s only a half a dozen countries that have nuclear power subs. Most, obvious one is the United States, of course, and the only country recently that we have promised to assist with this technology, or the Australians and the Australians being basically a continent and being a long way away from anything that might be a security threat, it does make some security sense for them to have nuke subs, but for South Korea, South Korea, no. 

South Korea is the size of Indiana, and its primary security threat is North Korea, which is right next door across the demilitarized zone. There is no, no, no military rationale for the South Koreans to develop a nuke sub to basically loiter nearby unless you see, nuke subs are good because you can do two things. Number one, you can strike from silence, but North Korea doesn’t have a functional navy, so who cares? 

Or you can store a weapons platform offshore for months at a time. Now in a conventional fight with conventional missiles, an offshore sub is a very limited use. I mean, the United States, every once in a while launches some Tomahawks, but that’s like a once a year event, if that. And it’s not the sort of thing that would really change the math. 

In a Korean conflict, but something to consider about the South Koreans is every few years they accidentally enrich some uranium up to near weapons grade levels. And then the IAEA, that’s the International Atomic Energy Commission, which is supposed to regulate nuclear technology, comes in, slaps the South Koreans on wrist, and they’re like, oh, sorry, that was accidental. 

We’re never going to do that again. Then happens again a few years. Basically what the South Koreans have been doing for the last 40 years is making sure that if they ever need to, they can make a nuclear weapon on a relatively short time frame measured in weeks. And now, if they’re going to have nuclear powered subs, that means in a relatively short time, probably under a year, they could have nuke missiles on those subs. 

What the South Koreans have now achieved is American sponsorship of what, in a few years, will now be a South Korean nuclear program. Whether this is good or bad really depends upon your point of view. The idea that the South Koreans need a deterrent versus North Korea. I mean, that makes a lot of sense. The idea that the South Koreans would like a way to go up to the Chinese and punch above their weight, that makes a lot of sense. 

But there is no way that one country in Northeast Asia adds nukes to their arsenal, and the other countries don’t do the same thing. So I have always been concerned that when push comes to shove, it will be Japan that moves first, or Taiwan because of the threat of invasion. Now it looks like it might be the South Koreans, but as soon as one of them get them, the other two are going to have to have them. 

So this decision might, from a certain monochromatic point of view, increase South Korean security, but it’s going to come at the cost of introducing an arms race to the broader region at the same time that the United States are stepping back, whether that is genius or pure idiocy is something that history will tell us. And maybe just within the next few years.

The Reality of Electricity in America

Electrical powerlines on a sunset

Doubling the US industrial capacity requires 50% more electricity…already a high barrier to entry. If we want to throw in some new data centers, add another 25-50% on top of that. No small feat.

Should the US want to accomplish this industrial buildout, then heavily investing in long-distance lines is essential. The data centers are going to require 24/7 baseload, which means nuclear or coal (and natural gas for surges). So, you’ll have to swallow that pill too.

Power needs to be able to flow from where it’s created to where it’s needed. Transmission is the name of the game. Without that, none of this works. And if someone tries to paint a different picture for you, maybe don’t drink their Kool-Aid.

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Transcript

Hello from Hazy Colorado. Today we’re taking a question from the Patreon page. Specifically, it’s about electricity and data centers and what is it going to look like if we’re going to do all these data centers, much less consider doubling the size of America’s industrial plant? 

How much power do we need in what is going to look like on the other side? How do we get there? A lot, a lot wrapped up in there. Let’s start by saying that we need 50% more electricity if we don’t do data centers, if all we’re going to do is double the industrial plant, data centers are on top of that, and that’s another 25 to 50% based on which model for the future of data centers that you want. 

Now, everyone broadly agrees on the problem here. Now, one of the big weaknesses in the United States grid is it’s not very well interconnected. We don’t have a lot of cross state, large scale electricity transmission lines. And what that means is that regardless of where you need electricity, you’re kind of stuck with local resources in order to get what you need. 

And that means you’re going to be overbuilding capacity in order to guarantee what you need, which means you’re going to have more facilities than the nameplate would suggest, and they’re going to be running that lower capacity. And that’s particularly true if you want to do something, say, with green tech. So, for example, if you put a big solar farm in, say, Arizona, you’re going to generate three times as much electricity as if you do it outside of New York City. 

And so the whole idea of a long range transmission line is you can take the power from where it can be generated efficiently or cheaply, and move it to the places that can’t. And in that way you get a much more efficient system, even if it might cost a little bit more. So roughly, if you expand the grid by half, you need about $1 trillion in new plant, new generation facilities, and then about half $1 trillion in distribution systems that assumes you’re doing everything within state boundaries. 

You’re paying more for more nameplate than you probably could use, because you’re gonna have lower efficiencies, but also means higher manufacturing costs, higher installation costs. Or you can spend about maybe 20% more, if that 20% more is almost exclusively on long range transmission. And if you do that, you build less generation that is more effective at what it does. 

And you wire in the power. Here’s the issue. The United States really doesn’t have any of those long range high voltage lines. In fact, if you’re looking at above 70 kilovolts, which is kind of the standard for like the big stuff, we only have one cluster in the country, and that is an area roughly a triangle between Pittsburgh, Pennsylvania, Chicago and Saint Louis, because in the middle of that triangle is coal country. 

And back during the 60s, 70s, and 80s, a succession of American governments came to the conclusion that it was cheaper to wire electricity than it was to rail coal. So you generated the electricity within this triangle and then had these massive lines to send that power somewhere else. 

If the goal is to have a lot more electricity, regardless of why that version of the model needs to be replicated more or less nationwide, and that is easily a $300 billion program, probably more now. 

Data centers specifically, something that everyone seems to forget, is that data centers churn all the time, 24 hours a day, which means any sort of power generation that cannot generate electricity 24 hours a day is something that a data center will not consider. So solar out because it’s dark every night, wind largely out because most places don’t have reliable wind currents. 

Although in some places, if you go high enough, that’s a possibility, which merely means you only have two options. Number one is you can build a new fleet of nuclear power plants because while they can be spun up and down, the Nuclear Regulatory Commission really doesn’t like to see those numbers change because it looks a little bit like a meltdown. 

And we try to avoid those. So you build a nuclear power plant either specifically for it or nearby, or you refurbish an old one, whatever happens to be baseload power, that’s what you’re after. Baseload power. The only other option is coal. Yes, you can build a natural gas plant, but natural gas is better for spinning up and down. 

You want it for surge capacity as opposed to more generally for baseload capacity. So either you’re getting nukes or you’re getting coal. And if you want data and you don’t like those two things, then you might as well does not try to do either. Data centers at all. And just kind of forget the next 30 years of human technological advance. 

This is what you need. Lots of long range transmission, lots of nukes, lots of coal, and then natural gas, solar and wind for everything else. Anyone who cannot lay it out like that to you, it’s been blinded by a degree of ideology or personal interests. This is what you need is a digital future or a more industrialized future is what you’re after.

Can Anyone Replicate the US Shale Revolution?

An oil rig on the sunset

The US shale revolution has altered the trajectory of the US energy sector, but can that success story be replicated anywhere else? Let’s head down under and examine Australia’s shale potential.

The Aussies have some promising geology, but lack practically every other metric that contributed to the success of the US shale revolution: abundant water, proximity to cities and infrastructure, deep labor pool, fast-moving regulators, and favorable mineral rights for landowners. That last one is the big one, because without that monetary incentive for landowners…what’s motivating anyone?

There are some other countries that have a better shot at replicating the US shale boom. Argentina already holds the second-largest shale industry. Mexico and Canada have the shale resources, but their industries are so tied to American infrastructure and markets that the US would have to help.

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Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado. Today we’re taking a question from our Patreon page, specifically from one of our friends down in Australia, wondering if it would be possible for Australia to recreate the sort of energy complex that the United States has, courtesy of the shale revolution. The United States is now just a gross over producer of both oil and natural gas. 

It’s driven down energy costs in the country, especially electricity costs, which are now among the lowest in the world. And it’s generated a robust processing and manufacturing system with downstream work and a significant export industry, Australia having a smaller population, but almost as much land could they do it? I don’t want to say no, but there’s some things you have to keep in mind. 

Number one, geology is just the first step. So in order to have a shale industry, you have to have a lot of sedimentary layers that are petroleum bearing that just the right age to generate oil, natural gas. And the United States has that because in the past, the North American continent, especially our part of it, has had a series of shallow seas. 

And then geology would change, and then you’d get another shallow sea and you basically got these stacked layers so you can drill down and hit multiple petroleum producing zones. In fact, in some places in West Texas, you can have upwards of 20 layers that you can all access from one vertical. Now with shale technology, you go down it until you hit that layer and then you go horizontally. 

And that brings us to the second thing. You need water. The way shale works is you make this suspension of water and sand, and that is pumped into the lateral through a series of holes that basically crack the, rock open and release the petroleum. And then back pressure pushes all the liquid out and eventually oil and natural gas comes to the surface. 

Don’t have to pump the stuff, but you have to have the water to do it. And part of that folds into the third issue, which is proximity. You have to have relative proximity for your oil and natural gas production. Two population centers are places that can take the stuff for processing. And in this this the United States is pretty good. 

We have shale zones in Texas, which of course can get pumped to corpus Christi in Houston. And the rest we’ve got some in Colorado which benefit the Denver area. We’ve got some in Ohio which can be pumped into the Northeast and Pennsylvania. Same thing. Australia’s problem is that most of the geology that looks promising is in the outback. 

So not only is it a long ways away from any potential population centers, you’re in the middle of a literal desert, so the water access is more difficult. You can access groundwater that’s done in the United States, too. But all of these things incrementally raise the cost of development. Let’s see what else. Regulatory structure. This is one where a lot of countries, trip up shale wells, as a rule, generate somewhere from the hundreds of barrels to thousands of barrels a day, which sounds great, but it’s not like the mega wells you’re going to get a place like, say, Saudi Arabia. 

So you’re going to have more of them and they’re more involved from a technical point of view for production. So you have to have a more advanced educational system to generate that sort of workforce. And the United States really does stand out among the world when it comes to petroleum engineers, because we’ve been doing it for so long. 

The shale revolution at this point is about 20 years old. In the United States. Our first oil deposits were back in the mid 1800s. So this is something that we’ve been going and going and going. It’s not that the Australians don’t have that, but most of what the Australians have been doing for energy production in the last 30 years has been offshore, where they tap foreign labor almost as much as local labor. 

So there’s there’s a labor crunch there. In addition, if you live in Houston, you can work in West Texas. If you live in Sydney or Brisbane, you’re probably not going to be working on the northwest shelf. It’s just too far. So linking these together, and then on the regulatory side, you have to be able to do things on the fly very, very quickly and have a regulatory structure. 

That’s okay with that. So in Texas, the Texas Railroad Commission, which is the one that regulates the space issues, permits 24 hours a day, 365 days a year. They drill on Sundays, they drill on Christmas. And if you don’t have an institution set up to handle that, everything else gets pushed back. This is one of the reasons why the shale attempt in Poland just didn’t work out, because the poles tried to work European hours and it just didn’t fly. 

The geology wasn’t as good either. But the most important thing, the single most important thing is landowners have to have an interest in the industry. So in the United States, unless you have signed it away, you own the mineral rights on your land. So if a petroleum company comes and wants to drill in your land, you get a chunk of the proceeds. 

We’re the only country in the world that does it that way. So when the United Kingdom tried to kick in the shale that ten years ago, they discovered huge amounts of local opposition because the companies would take all of the money, and that would be that the locals had to deal with the noise and the traffic and all the rest, and they saw absolutely no benefit. 

Australia is kind of in that camp. So if, if, if this is going to happen, it’s going to take a lot more money and put a lot of pressure on the labor force and require a regulatory and maybe even a legal overhaul of property rights in Australia in order to generate the sort of outcome that you might want to see. 

There are three countries, however, that are worth keeping an eye on when it comes to shale that are closer than Australia to achieving something like the United States. The first, ironically, is Argentina. They already have preexisting infrastructure in a place called vacuum worth a dead cow fields which are very close to populated Argentina, including Buenos Aires. The socialist governments of the past set a price floor. 

So anyone going to invest knows how much they’re going to get out. So even though the property law structures are weird and it’s Argentina. So if they’re very weird, if you know the rules of the game on the day that you start, you can get some projects going. And so Argentina already has the second most successful shale industry in the world. 

The other two to watch are Mexico and Canada. both have a shale fields that in many ways are extensions of the American geography, especially northern Mexico. The weird thing about Canada in Mexico, though, is their closest population centers for most considerations around the American side of the border. So if we’re going to ever see a successful shale industry in those two countries, it will be because they’re accessing American infrastructure, population structure, processing infrastructure and basically linking into a greater North American energy grid. 

Doesn’t mean it can’t happen, but if you’re in Ottawa or Mexico City developing a local energy sector to serve another country, let’s just call that a bit of a political complication.

Can 3D Printing Save US Manufacturing?

A 3D printer

We’re entering an era where restructuring global manufacturing will be non-negotiable. As supply chains collapse and tariffs complicate this process, can technology like 3D printing take some of the pressure off?

Investments in US manufacturing have declined under Trump’s protectionist policies, since relocating abroad can help avoid the tariff rabbit hole. 3D printing offers a promising solution for reshoring some of that manufacturing, but it’s too inefficient for large-scale production as of now.

As 3D printing improves and finds niches that align, this could be a disruptive technology. However, we won’t be replacing mass manufacturing with these printers anytime soon.

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Transcript

Hey, all. Peter Zeihan here. Walking down Indian Creek on my way out. Dreaming of Mexican food. But you know that’s not going to get satiated. Because there’s no good Mexican food anywhere near Denver. Anywhere. Today we’re taking a question from the Patreon crowd. And specifically, it’s, building off of some of the concerns that I’ve had with manufacturing. 

The short version is that the more complex the manufacturing system is, the more countries are involved. So when you put tariffs on the import of manufactured goods, either the finished product or the parts, what you’re basically saying is I don’t want to participate in the supply chain because it’s cheaper for everyone to move their production base out of your country. 

And then just import the finished product at the end of the day. Otherwise they have to pay the tariffs two, three, four, ten times. It’s one of the reasons why, the Trump tariffs are actually reducing investment in physical plant in the United States and reducing the amount of manufacturing products that we’re actually producing anyway. The follow on question from that is, is there a technology out there that might help us to get around that? 

And there, there might there might be, something called 3D printing. Basically, you take a powdered substrate, whether it’s a plastic or a metal, and then you sinter it with a laser, and grow a product. It’s often called additive manufacturing as well, instead of subtractive manufacturing. So subtractive manufacturing was more like punch holes and things. And you start with a block of material and you whittle it down until you have what you need. 

Additive manufacturing or 3D manufacturing? 3D printing is the opposite as you build it up layer by layer. Now, there are plenty of things that this looks very promising for. But the key thing to remember is if it has moving parts, especially moving parts that are different materials. It’s not that this technology cannot be used, it’s just that there are some pretty sharp limits materials, printers that can handle more than one type of material are pretty new, really just in the last 510 years. 

And the speed at which you can do things like this is very slow. So it’s very popular in things like, prototyping where every prototype is unique and then it doesn’t matter if it takes you hours to days to print the product. It’s also very popular in things where, abnormal shapes rule. So especially if you need a lot of strength but not a lot of weight. 

So you’re going to leave holes or bubbles within the material. So for aerospace, there are actually examples of 3D printers already on production floors and to a lesser degree in automotive as well. But the big thing to keep in mind here, speed, in the time that it takes you to stamp 100 products, you’re probably only going to make one 3D printed product, and so while 3D printing is getting incrementally better day by day and that’s great. 

And while it will undoubtedly, as the cost of manufactured products go up, as the globalization kicks in, it will obviously find more and more niches, where it’s the applicable technology, but it will always be coming from behind when it comes to mass application because of that speed issue. So I like the technology. I like the way it’s going. 

We should hurry up and get there.

How Was Trump’s Trip to Asia?

Donald Trump and Xi Jinping at the G20 Summit

President Trump has wrapped up a whirlwind trip to Asia; he met with several key regional leaders—including Japan’s new prime minister Sanae Takaichi and Chinese president Xi Jinping, participated in summits, and crafted some new deals (at least he said he did).

The United States is pivoting away from China and focusing on younger, faster-growing countries in Southeast Asia. This transition has been anything but smooth; wild tariff policies and inconsistent messaging are keeping things…interesting. The Trump administration has made a temporary truce with China, but let’s not expect that to hold very long. Deals with other countries will be nice if they happen, but until I see someone other than President Trump confirm them, I won’t get my hopes up. South Korea is the only tangible progress I’ve seen so far, with $150 billion in US investment in exchange for lower tariffs.

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Transcript

Hey all. Peter Zeihan here coming to you from Colorado. Today, I gonna give you a quick breakdown of what happened in Asia last week. Donald Trump had multiple summits in Southeast Asia and Northeast Asia, up to and including a one on one with, the chairman of the Chinese system, Jinping. So. We’re in the midst of a major transition in the United States in terms of trading partners. 

And whether you think it’s for strategic reasons like the, the micro group and Trump seems to think or you think it’s for demographics reasons, which is kind of my general feel, there’s not a lot of disagreement, as to what’s happening as opposed to why it’s happening. So what’s happening from my point of view, is that the northeastern Asian countries, most notably China, are aging into not just obsolescence but national dissolution. 

And so the trade relationships with countries like China, have to go to zero more or less. Anyway. Now, if you want to do that earlier for political reasons, there’s some complications there. But, we’re going to get to the same places. It’s a question of time frame. On the opposite side of the ledger is Southeast Asia, where the demographics are broadly healthy and the relations with the United States are broadly positive. 

So it makes sense. You want these relationships to grow over time because they can. And if you choose to, denigrate those relationships, you’re making a political choice to punish yourself economically. So the relationships from a tariff point of view under Trump have been, in a word, erratic, with multiple times threats on the Chinese going up to 100% tariffs, and sometimes actually being there, but at the same time, in Southeast Asia, some of the codified tariffs that the Trump administration has put in place, not negotiation tactics, actually codified tariffs are some of the highest in the world, which is directly been penalizing American companies that have been working to move their trade exposure, away from China, since Covid. Anyway, Trump was known in Southeast Asia, met with a lot of the Asean leaders and hammered out a series of deals, most notably with Indonesia, Malaysia, Vietnam and Cambodia. And really across all of them, the the core issue is that these really were only deals as declared by, Donald Trump himself. 

And none of the four countries are really talking about them in the same way. Most of these deals never even had a text released or even a press statement from the hosting government. So it’s all very much in progress. Basically, the approach that Trump seems to be taking is that our trade deficit in goods has been imposed on us. 

And his unfair, but our trade surplus in digital goods has been earned. And so therefore it is fair. If you don’t accept that, you can have tariffs. And needless to say, there’s a lot of countries who find that general negotiating position to be unfair. And so there hasn’t really been any meaningful progress made on the talks. A lot of little details have been popped up like, say, rare earths exports from Malaysia as being a big deal. 

But, you know, Malaysia already exported rare earths to the United States. They just put a limit on the exports to the world, not just the United States. So they would have enough of themselves. None of this has really been changed. And the country that is probably, from my point of view, the most important to the United States mid term as a trade partner would be a Vietnam and more technically technologically advanced than the Chinese are. 

They have over a, you know, workforce. It’s almost 100 million people. If you’re looking to plug gaps, it’s a country you want to plug them with. And we really didn’t get a meaningful deal out of these agreements. Moving up to Northeast Asia, there does seem to be more progress with the Japanese and the Koreans. The Koreans are in a desperate position because the demographics are so bad, and they realize that if they can’t maintain a working relationship with the United States of the kind of screwed as a country. 

So they were willing to give a lot more and we actually got our most detailed deal yet. Out of all the trade negotiations between the Trump administration and the rest of the planet just came out of Korea just a few days ago. That doesn’t mean it’s done. Basically promises that the North Koreans are going to dump, over $150 billion of investment to the United States, which I would argue they were going to do anyway. 

But now it’s codified. And then in exchange, they got a lower tariff rate. This is really the first deal we’ve seen out of the white House that actually has numbers to it. Now, it remains to be seen whether it can be done, because some of the numbers involved are pretty big for a country the size of South Korea, which has under 50 million people, but still progress. 

And then the final deal, with the Chinese will come back to that. Now, before you think that I’m just like, Trump’s an idiot and he doesn’t know how to negotiate, he certainly doesn’t understand trade. Let’s look at this from the Chinese side, because Chairman XI Jinping went to Asean almost immediately after Trump was there and talked about multilateralism and unicorns and chocolate and how we’re all one big happy family and signed a trade deal with the Asean countries, a face three day trade deal. 

So while the Southeast Asians and to a lesser degree, the Koreans and the Japanese are looking at Trump like God, when will this end? They’re not looking at gee and think, oh, thank God she was there. No, no. They’re like, you expect us to believe us that you’re the nice guy, the one who’s been bullying us on every issue for the last 30 years, that suddenly we’re going to love you. 

So you look at Trump and they say he doesn’t understand economics or trade and the right and then they look at gee and like he doesn’t understand diplomacy or trade. And the right one of the things to keep in mind about both leaders is both of them have actively circumscribed the type of people that they allow in the early circle to be people who will never even appear to know more about any topic than they do, because they don’t want to be told that they might be wrong. 

So we have these completely ossified Jared autocracies running the two largest countries in the world right now, and it’s showing up and how they’re dealing with every other country. So really all that leaves for today’s topic is how they dealt with one another because she and Trump met directly in Korea. We have a temporary defuzing of the trade tensions. 

There’s no reason on any side to think that this is going to last. But the Americans agreed to reduce the tariff rate. They were charging the Chinese. They removed their threat of an additional 100% tariff. So based on what the product is, the tariff rate from products coming from China, somewhere between 20 and 50%, again, in exchange, the Chinese agreed to limit fentanyl precursor exports to the United States and to start buying some soy. 

So from my point of view, on the outside looking in, the Chinese agreed to do some of the things that they have agreed to do over and over and over these last 15 years in exchange for actual concessions. And if the Chinese actually do what they say they’re going to do this time, it will be the first time that has ever happened. 

Part of the problem that the United States always has in trade relations with the Chinese is there’s rarely any follow up, and there won’t be this time, because that requires a team that is actually staffed out to enforce the trade deals. And even under normal circumstances, where the United States has the Commerce and the Treasury Department of the U.S. Trade Representative’s office dealing with trade issues, that’s a lot to do. 

And this time around, Commerce and Treasury in the USTR aren’t even staffed out. And Trump is handling the negotiations personally. So just as what happened in phase one trade deals between the Chinese and the Trump administration in the first Trump presidency, the Chinese aren’t going to do any of this. And we’ll be right back where we started six months from now. 

And one more thing. One thing that doesn’t change. You know, the more the things change, the more they stay the same. With these adjustments. This last week, we are now in our 540th tariff policy since January 20th. So the ambient chaos that is confusing American traders and manufacturers and consumers. Showing no sign of letting up. There’s no reason to expect that any of these deals are the final version. And until we get, well, maybe, maybe, maybe Korea. So maybe we have one. Until we have a whole raft of those, the back and forth and the ebb and flow continues.

Imminent US Strikes Against Venezuelan Government

A US Fighter jet conducting a barrel roll

It appears that US military strikes against the Venezuelan government are imminent. Let’s take a look at what passes for a military in Venezuela.

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Transcript

Hey, all. Peter Zeihan here coming to you from Colorado. And today we’re talking about Venezuela because it looks like the United States is getting ready to overthrow the Venezuelan government. We now have the USS Ford, which is the largest and newest of the American super carriers in the region, by far the most important and powerful battle platform that humanity has ever created. 

A along with roping in certain countries in the region like, say, Trinidad and Tobago, which are directly off the coast of Venezuela. And then, of course, the US facilities in Puerto Rico being used very aggressively to push troops and ships into the regions. 

Let’s talk about what the other side looks like. Okay. That’s about it. One of the fun things about Latin American militaries is back in the 1970s and 1980s, they were involved in coups. And so when democracy kicked back in in the 90s and 2000, the military’s were deliberately gutted. 

And so as a result, they’re really not capable of much. 

Venezuela was a partial exemption to that because in Venezuela, you actually had a relatively robust democracy throughout this entire period until a guy by the name of Hugo Chavez, who was a military dude, through his own coup and overthrew the democratically elected government and basically imposed an authoritarian system that has since, under his successor, become flat out dictatorial. Chavez. Maduro and their click have basically robbed the country blind, ripping up everything that wasn’t bolted down and even a lot of things that were bolted down and basically destroying the entire, non-oil economy of the country. And they haven’t exactly done a great job with the oil economy either. So what used to be the most technically, educationally, and industrially advanced country in all of Latin America is now a laggard. 

What that means for the military. Well, Chavez, when he came in, was not a general. I think he was a colonel. Was even that? No, I don’t think he was even that. I’m not a big dude. So his coup wasn’t really military in the traditional sense, and the military had been a pillar of support for the old government. 

So Chavez started by buying off the leadership of the military directly, but no longer really purchased a lot of equipment. Then when it became apparent that he was going to be opposed to the United States and he realized the military hardware would be useful. He started buying hardware from the Russians. But the Russians, not having a lot of respect for Chavez, sold him a lot of crap. 

That didn’t even operate when it was purchased in the 2000. Well, it’s now 2025. And for the last several years, the leader of Venezuela has been a bus driver. So the military has not been given a priority. It’s been gutted of all of its leadership. It’s basically been turned into a corruption sieve. And they haven’t gotten really good equipment since the 1990s. 

So if it came up to a straight up fight between the United States embassy guards in Caracas and the Venezuelan military, I would bet on the embassy guards. Even those are only a couple dozen of them, because they’re Marines and dirt. In a straight up fight between the military of Venezuela and the military, the United States. There’s no math here. 

If the United States decides that it wants to knock off the government of Nicolas Maduro, this is an operation that will be measured in hours, days if they get really lucky. That doesn’t mean that this is a great idea, because there’s always the question of what happens the next day. Knocking the government off is the easy part, especially in a place like Venezuela. 

Putting a government back together on the other side. Well, the United States tried to do that in Iraq and Afghanistan, and we saw how much fun that was. Venezuela is in better shape than Afghanistan, but I’d say worse shape than Iraq was under Saddam. 

Oh, and one more thing. Under the previous government, Chavez, the Venezuelan government 

imported a huge number of AK 47. Not for the military, but for the population. And then built an AK 47 facility to make more. By a very, very, very, very conservative assessment. There’s 100,000 AK 47 in public circulation with the approach of eastern gangs. 

And a probably a more realistic number is upwards of a half a million. So no matter who the next political authority is who tries to run Venezuela, there are literally hundreds of thousands of assault rifles in the hands of a population that has literally been paid for the last 25 years to be on the side of the government that will now be deposed. 

So whatever comes next to Venezuela, Lord, it’s going to be messy.

Would You Like Some Plutonium with That?

Fragment of Plutonium | Photo by wikimedia: https://upload.wikimedia.org/wikipedia/commons/6/60/Plutonium_%28Element_-_94%29_3.jpg

The US needs to massively expand its ability to generate electricity. A possible solution? Mixed-oxide nuclear fuel. We’re talking repurposed weapons-grade plutonium mixed with uranium. This is complex, expensive, and time intensive. And perhaps more to the point, there’s a proliferation concern. No surprise that Russia is the only country that has done this so far…

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Transcript

Hello. Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about an old technology that the Trump administration is dusting off and seeing if it’s applicable for the current environment. The reason is that the United States has just massive electricity shortages right now, and a number of states are on the verge of having, rolling brownouts. 

And we’re not talking here about California. We’re talking about everybody. Trump administration says that it wants to massively expand manufacturing output. We can debate whether the policy that is in place is going to enact that. But I would argue that we need to expand, the industrial plant by at least double in order to prepare for a globalized world. 

Most of the products that we’re used to importing, we’re gonna have to make ourselves one way or the other. Plenty of debate to happen about the specifics of Washington’s policy. But if any version of this is going to happen, we need more electricity. We probably need to expand the grid by about 50%. 

And at the moment, pretty much all electricity expansions in the country are on hold. The Trump administration’s tariff policies have massively driven up the cost of doing everything that is related to the grid. For example, copper and aluminum, the two biggest inputs. And those now have a surplus tariff of 50%. And the government has actually canceled a number of power plants that it doesn’t like. 

Because Donald Trump doesn’t like windmills. So the government, as a partner in the process of expanding the grid, has basically become a burden rather than a bolster. So this new technology, old technology, is something that maybe the government can actually step in, in a constructive way. And it’s called mixed oxide fuel. In essence, you modify a nuclear power reactor. 

So instead of running on a down blended uranium, where, say, 3 to 5% of the uranium is a fissile component, in a broader block of power fuel, you instead use MOX, which is a mix of uranium and plutonium. Whether one technology is better or worse than the other from an economic point of view is very much in debate. 

The only country that uses Mox at the moment for their civilian power systems is Russia. And Russia does it because it had 30,000 nuclear warheads, mostly plutonium driven, as part of its arsenal. When the Cold War ended. And they basically when they decommissioned them as part of arms control agreements, they took all of those warheads and spun them into the fuel. 

So from their point of view, it’s a big savings. As a rule, once you factor in the cost of expanding or modifying your nuclear power system in order to use the MOX, it’s probably a wash for an economic point of view, because the up cost investment is so high. And if you’re going to use it just to use spent military, surplus equipment, eventually you’re going to run out of that. 

You don’t have to have a plutonium supply chain. So a number of countries have played with this technology, most notably Britain, France, the Netherlands, Belgium, and Japan, also India. But no one has actually instituted as a civilian program. The problem is very simple. Not a lot of countries have nuclear weapons. Not a lot of countries had tens of thousands of them to decommission to serve as an input fuel source. 

Really just the United States and Russia in that regard. Which means that if you want this to work, you have to build a civilian plutonium production system. Now, plutonium does not occur naturally in the world. It’s pretty much only generated as a byproduct of a, you guessed it, uranium power plant. One of the waste products that comes out of spent uranium based nuclear fuel is plutonium. 

So if you want to have a MOX industry, first you have to have a uranium power plant industry, and then you have to have a system that takes the spent nuclear fuel and separates out the plutonium and purifies it. So basically, to have this sort of power sector, you have to have a civilian system that creates large volumes of weapons grade plutonium as part of their supply chains, which explains why most countries have not embraced it. 

The Trump plan would do basically an echo of the Russian plan and take some plutonium cores from weapons that we have decommissioned and convert them to MOX. The problem they’re going to come across in addition to the proliferation question, is the same problem of everyone else who has decided to play this game. It’s a processing issue. You have to take the plutonium cores from the old decommissioned weapons, spin them into a different form in a different geometry. 

it’s a manufacturing issue. It’s a fabrication. And above all, it’s a processing issue. And one of the problems the United States has at every level right now is we don’t have enough materials processing. We need to be able to turn bauxite into aluminum. We need to be able to turn iron ore into steel. We need to be able to turn copper ore into copper wire. 

And if this program was going to work, would need to be able to turn surplus plutonium cores from decommissioned weapons into fuel. So it’s an interesting idea, but there’s a lot of upfront investment that has to be done before you can seriously try it. 

They are hoping, hoping, hoping, hoping to have a little pilot program going by the end of calendar year 2026 to see if it’s even viable. I don’t know if it’s going to be viable, but as part of this process, you also then have to prepare a fuel cycle that puts weapons grade plutonium civilian hands on a regular basis. 

And to this point, the only country in the world that have decided that that’s a good idea is Russia. And Russia, of course, is one of the world’s great proliferator.

A Dark Future for American Agriculture

Large white barn in imploding stage with white concrete silo

Next up on Trump’s chopping block, we have US agriculture. Staring down a broad list of restrictive tariffs, US agriculture is entering a crisis of its own.

Many countries, including China, are now avoiding American farm products. Since a significant portion of farm output is sold abroad, this threatens farm incomes across the board. This is happening at a time where US population growth is stalling, so that lost income can’t be made up through domestic demand.

And as you could imagine, federal relief is unlikely. The USDA and other agencies remain understaffed and unable to navigate this trying time and Trump’s erratic policymaking adds another layer of complexity to the mix. Ironically, Argentina (one of America’s largest competitors in the farm industry) is getting a $20 billion bailout from the US…

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Transcript

Hey all, Peter Zeihan here. Coming to you from a sunny Colorado day. And today we’re going to talk about the American agricultural sector, which is facing some very, very dark times, as a result of the Trump tariffs on everyone. Most countries in the world have decided that they will never purchase American agricultural products ever again unless they have no other choice. 

Now, there are a lot of countries that have no other choice. Mexico is by far at the top of that list, but Mexico is only one of a number of countries that are of concern for the American farmers. China is obviously the country that they’re most obsessed about right now, because it’s been the number one consumer of most of our agricultural exports, minus Mexico, of course. 

For several years now. And new purchases of American beef and soy have basically stopped. Beef purchases have gone down by over 90%, this year, and soy purchases have gone to zero. And it looks like production cycles in places like Brazil and Argentina are going to be solid enough this year that the Chinese won’t need to purchase any product. 

In those sectors from the United States at all this calendar year. so three things here. Number one, something I’ve been telling American producers for years is you need to prepare for the world where China doesn’t buy any of your stuff. Not because of politics, not because of trade policy, but because they’re dying out. And their demographics are beyond terminal. 

And over the course of the next decade, we’re looking at state collapse. So any business plan that is based on sales to China is one that is going to make you lose the farm. Literally. The Trump tariffs have simply moved that forward. We’re now having to deal with it. Number two is the scope of what’s happening here. 

The American population has not grown very much over the last 30 years. It’s been a very slow creep up. And because of Donald Trump’s, policies that have increased the cost of living drastically this year across the country, as well as driven migration to zero and even into negative territory. Calendar year 2025 will be the first year in American history that the American population will actually shrink. 

Shrinking means no increases in food consumption. So about 95% of the increase in farm income since 1992, when hyper globalization became a thing, has been from selling, not to Americans, but to selling to foreigners, which means that today, roughly one third of all agricultural produce in the United States is exported. And with exports now flatlining, going sharply negative. 

That suggests that we are looking at a massive decrease in the take home for any American agriculture producer. That’s going to be a lot more than one third, because you only eat so much food. And if food becomes cheaper, if all food becomes cheaper because people are dumping it on the local market, you don’t only lose your premium from exporting, you lose income at home. 

So a one third reduction in demand for American product is actually more like a two thirds reduction in income for farms, and we’re not going to see anything quite that drastic, but it is going to be horrific and probably over the course of the next two years, or one quarter of American producers are going to go out of business and the remainder will be under extreme financial stress. 

Which brings us to the third issue. There’s not a lot that the federal government can do about this. There are now conversations going on about using some of the tariff income to bail the farmers. But one of the American bureaus that was hit most strongly by Dodge in the early days of the Trump administration was the Department of Agriculture, and USDA cannot implement the policies it has now, much less design and implement a new one. 

So the ability of the federal government to do meaningful bailouts is almost nil at this point, even if the cash was appropriated by Congress, which is unclear whether or not that would even happen. Even if the money flowed, we don’t have the ability to administrate it anymore. 

And against this backdrop, we are continuing to see policy incompetence out of the Trump administration because of a lack of personnel. Trump’s tell is he doesn’t like anyone in the room to think that they’re smarter than him. And he certainly doesn’t want to think that he’s not the smartest person in the room is very Obama esque in that regard. 

And so the way he dealt with this when he was out of power was instead of turning the Republican Party into a policy arm that could implement his policies, he took over the institution and basically got rid of any policy expert so that he would always be the smartest person in the room from his point of view, which means when he came in, instead of having this cadre of thousands of people that he could use to staff the government to make his vision possible, he came in with almost no one. 

Certainly the fewest number of skilled hands of any president in modern history. And most of the people who he did bring in were like Pete Hegseth, who were just absolutely incompetent in their portfolios. What that means for places like USDA is it’s still not staffed up. Well, neither is commerce. And here is USTR. Neither is energy. 

None of them are, So the president is not getting good policy recommendations. And as we’ve seen recently with his decision to, basically discourage everyone to use Tylenol because it apparently causes autism now because that’s what he feels. We’re getting some of his feels in foreign policy, and one of his feels is that he likes Argentina. 

Because the government there is led by a guy by the name of Malay that who he thinks of as an ideological ally. Now, nothing could be further from the truth. Malay is a libertarian, and Malay personally is just horrified by some of the economic policies that are going on in the United States, where Trump and it’s moving us very rapidly to some form of Argentinian style socialism. 

But that’s a topic for another day. Anyway, since this is what Trump feels, Trump is doing a 20 billion odd bailout for Argentina. Now, I am one of those people who thinks that Argentina is a country that’s going to be with us long haul, and having decent relationships is a solid idea. But, but, but Argentina has defaulted on every debt it has ever had over the course of the last 120 years, and in the last 30 years, the pace of those defaults has accelerated. 

So any bailout for Argentina is money that you simply won’t get back on top of that, Argentina is one of the world’s leading producers of soy and beef, along with any number of other agricultural products. And in the world to come, the single largest long term competitor for American agriculture will be Argentina Freakin Tina. And now the Trump administration is bailing it out. 

And Argentina is preferencing sales to American competitors. Like China, that’s basically shutting American producers out of the market. So farmers are getting hit from a foreign policy angle. They’re getting hit from a policy incompetence angle, their getting hit from a financial angle and demographic angle and a market angle. And really, the only possible way that we exit this next five year period with all of our producers is if somehow the Trump administration works out a French style support system that basically pays the farmers to exist not very American, not very capitalistic, and something that arguably the Trump administration can’t even staff up right now.

America’s Generals Gathered for…That?

Official government photo of Pete Hegseth

It appears Trump and Hegseth have been getting the Led out, because the song ‘Ramble On’ pretty much summarizes how their speeches went the other day.

With America’s generals gathered, I was worried that Defense Secretary Hegseth and President Trump would make some dangerous comments or announcements. While they both managed to make everyone seriously uneasy, it was more mush than alarming.

Hegseth focused on culture-war themes. Trump rambled about God-knows-what, with a few coherent sentences that the teleprompter fed him. But both speeches highlighted the lack of strategy and alarming drift of US military leadership.

Don’t believe me? We are including the text of the speeches so you can enjoy the fun yourself.

Link to Hegseth’s speech

Link to Trump’s speech

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. This is a topic I was hoping to avoid, but so many people have written in on the Patreon page, and I feel like I kind of have to. Today’s the 1st of October. Yesterday was the 30th September. And, yesterday was the day that Secretary of Defense Pete Hegseth and the US president, Donald Trump, addressed the entire coterie of American generals who were flown in for the speeches. 

Honestly, it reminded me of, Gaddafi of Libya or Fidel Castro of Cuba in their later decades when they would stand in front of an audience, says blah, blah, blah about nothing for hours. There didn’t seem to be a point to the speech at all. And the day before, two days before, when Trump was talking about putting himself on the agenda, he said something along those lines. 

Isn’t it nice that so many people are coming from so far away? But Secretary of Defense ordered them to come. This wasn’t a social call. 

I was originally very much dreading the speech. I was expecting perhaps a really dark turn in American form and strategic policy. Luckily, we did not see that, which is not mean that there was anything that happened to the speech that makes me feel good. I just that sense of dread I was feeling is no longer there. So, let’s start with Haig stuff, because that was the more substantive context. 

And then we’ll move on to, Donald Trump, because of, least qualified defense secretary in American history. His words, not mine. I just happened to agree with them. He said them during his, confirmation hearing. He actually said somebody who doesn’t know anything about the sector whatsoever, if they were to go in, could actually do better, than any of the secretaries of defense that we’ve had since World War two. 

He has proven that to be lovely, inaccurate. At this point, most of his speech was spent on the culture war. Basically, it was like he was giving a long monologue back from when he was on Fox News as a correspondent. Very, very short version. He made it very clear that any sort of protections that existed for any sort of group, whether it’s women or blacks or whatever, they were all going away, the physical requirements for anyone who is in a combat role will be based on men, which basically will exclude, 80 to 90% of women who are already serving from continuing if these policies are instituted. 

Keep in mind that the United States is going through demographic decline and the single largest growth unit in terms of recruitment for the military for the last half decade has been women, especially as we move to a more technical military. So by establishing these criteria, we’re basically guaranteeing that we’re not going to be able to hit our, recruitment numbers, and it’s going make hitting the technical numbers very, very difficult. 

Probably what this will mean is the United States will have to take a page from what it did during the war on terror, specifically in Iraq, and start playing, six figure salaries to contractors because we can’t generate the staff that is necessary. So from a strategic technical, recruiting, equity and especially warfighting capability, these pieces are just a series of horrible ideas. 

He also made it very clear that all of these generals who have decades of experience, if they don’t like it, they can quit, which is, you know, how it’s supposed to go with policy. But he was kind of rude about it. Anyway, I spoke to a number of people who were in the room, and, let’s just say that Secretary Hegseth is not exactly well respected because there’s a lack of credentials. 

And, well, some secretaries, like, say, Secretary Rollins in agriculture came in not knowing much, but really put her nose to the grindstone in order to school herself up on the issues in play. Hegseth has done nothing like that. He hasn’t even built a senior staff yet. So he does a lot of proclamations like this speech today or yesterday. 

And then he goes and does some social media or maybe pumps iron with the troops, because that’s what a secretary of defense is apparently supposed to be. My favorite line from someone in the room was that, if Secretary Hegseth just wanted to remind us all that he was incompetent and not worthy of the position. He could have just done that in an email. So harsh. Then Donald Trump. Oh, okay. So we’re going to append the full text of both speeches, Hegseth and Trump’s to you. So you can read this for yourselves. But oh my God. 

If I were to sum it up in one word, it would be bumbling. There were really only about three full sentences and an hour of him yammering on about loves lost and fights one, and how wife is one of his favorite words. And it was obvious when those three sentences came up because he was reading directly from the teleprompter. 

In his opening paragraph, he said, you guys can do whatever you want. You can laugh, you can cry, whatever. Of course, if you leave the room, then there goes your career. Super inspiring. Dude. There were no policy announcements. There was no strategic guidance. There was really no reason to be there. aside from the fact that he had a captive audience, and from what I heard from the people who were in the room, everyone was just sitting there. 

Stone faced the whole time because it wasn’t even a political speech. It was just rambling and the line of somebody who shared it with me that really got me was like, if the president wanted to highlight to us that he was no longer capable. Mission accomplished. I’ll let you read the speech yourself. I’ll let you decide for yourself. 

The one item that did perk people’s ears up is when the president said that he was considering using American cities as proving grounds for the US military. There is not a successful country in human history that has done that. Because once you turn the defenders of the nation on the citizens and the social contract is broken, and you need something new that is based on fear, that is the downfall of the Roman Empire and the Hittites and the Byzantines and any number of things since you keep your internal security forces and your external security forces separate at all costs and yes, yes, yes, Portland annoys me too. 

But the idea that you’re going to use Chicago or Nashville or anything else as a training ground, no, it was almost as if the president was daring the assembled generals to carry out their oath to defend the constitution of the country from all foes, foreign and domestic. And I am not comfortable with where this might lead. About the only thing I can say about it is that this was one of those bumbling passages that was made in passing, that was not the centerpiece of the speech. 

It was one line amongst a lot of mush. 

I don’t think anyone walked out of that room encouraged by their leadership or the current state of military policy. But considering some of the things that we have seen in military and strategic policy in the last few months, I still count this as a win.

And You Thought the Jones Act Was Dumb…

A mack truck on the highway

If you tasked me with creating a list of the greatest threats to America, I’m not sure cabinets, name-brand drugs, and semi-trucks would be on there…but the President disagrees.

So, get ready for a massive economic bulldozer to hit the US due to these new tariffs. With 90% of all US cargo moving by truck, these higher costs will create a ripple effect through every sector. This all started back with the Jones Act, which made domestic shipping prohibitively expensive, causing a shift in freight from ships to rail to (almost entirely) trucks.

Since those trucks are made across an integrated North American supply chain, dipping into Canada, the US, and Mexico, tariffs are hitting hard. That means everything Americans consume, from your food to your clothes, will cost a whole lot more.

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Transcript

Hey all, Peter Zeihan here coming to you from Colorado today. We’re talking about the newest hit to the American economy. We now have tariffs on cabinetry, semi-trucks. And what was the third one? Name brand drugs, all of which have been classified as national security threats. Cabinetry. That’s an interesting one. Anyway, we could pick apart this all day, but I’m going to focus on the trucks because that’s the one we’re all going to feel soon. 

And most deeply, right now about 90% of all cargo, all ten miles of cargo that are transported to the United States are transported on the roads by semi-trucks. Now, it didn’t used to be this way. If you go back to, the depression, we had something called the Jones Act, the Interstate Commerce Act, which said that any to any cargo transported between any two American ports, regardless of where they were, had to be on a ship that was American built, American captain, American crude and American owned. 

As a result, we saw the cost of transport on the waterways increase in terms of, cost per ten mile by a factor of five. And we went from transporting most of our goods and especially most of our intermediate manufactured goods, especially in places like, the Great Lakes in the upper Midwest. We went from that being the dominant mode of transport to basically at whittling away to today in terms of ton miles, we only use our waterways for about 1% of our total cargo. 

It has been, in my opinion, the stupidest law that the United States has ever adopted. And it’s now been in place for a century. As a result, things went places where those restrictions were not in place. first with train and now with truck. Now with the Trump administration policy, there’s 100% tax on those trucks, of which about 80% of the imports come from Mexico. 

Another 10% from Canada. And As with anything that involves NAFTA, nothing that just made in one of the three countries. It’s an integrated supply chain that uses all three. So basically what we’re doing with this new tariff is saying this multi-step supply chain that we have, where parts of the trucks go back and forth among the three countries, if the finished product is actually done in Mexico, which is the relatively low cost work we will then tariff the cost of the entire truck when it comes back. 

So, in essence, retrofitting American workers and American companies who are making American products, who just happen to have the bumper stamped on in Mexico, and since 90% of our cargo is transported by heavy truck, you’re going to feel this in every sector. It doesn’t matter if you’re a hog farmer in Iowa sending your hogs to market, or if you are just ordering something on Amazon, it’s getting shipped across the country. 

The only people who will not feel this are the people who are in a physical position where supply chains for imported goods do not use the trucks, and that means you would have to be in one of the major port cities that has a mega port. So those are New York, new Jersey, Miami, Houston, Savannah, to Colma and LA Long Beach. 

Anyone else? This is going to hit everything that you consume. So I have long said that the Jones act is the dumbest law we’ve ever had, but it’s got some competition.